How to Boost U.S. Exports: Legalize Them

Ryan Olson /
September 26, 2012

The Obama Administration appears to be picking winners and losers again. The President has said he wants to “double our exports over the next five years” through his National Export Initiative. Apparently, those exports don’t include natural gas, a booming and vibrant sector of the national economy.

Currently, liquefied natural gas (LNG) exports are restricted to countries with free trade agreements with the United States. Producers wishing to export to countries without U.S. free trade agreements must first get approval from the Department of Energy (DOE). With proven reserves of natural gas in the U.S. at an all-time high, companies have been flocking to export LNG to foreign markets. However, the DOE is stonewalling, approving only one of the 13 requests to export to non-free trade agreement countries and staking further exports on the release of a report that has been delayed until early next year. These types of bureaucratic hoops only hurt American companies and bring into question the President’s commitment to increasing exports.

The Administration appears to be listening to economic advice from interest groups (including environmental groups) who oppose natural gas exports. They argue that free trade in the LNG field will disadvantage U.S. consumers, claiming that as the spread between the international price and the domestic price closes, U.S. prices will rise. In fact, maintaining artificially low prices in the U.S. by limiting exports and protecting domestic industry discourages firms from entering the market for natural gas extraction, reducing supply and ultimately increasing prices. Chesapeake Energy, for example, has suffered from low natural gas prices in the U.S., hurting profits and forcing it to sell assets.

Recent studies have shown that exporting natural gas could make U.S. producers up to $3 billion per year, creating much-needed jobs for Americans. Reducing burdensome trade restrictions will also make U.S. firms more efficient, encouraging competition and reducing prices—ultimately helping consumers and spurring innovation.

The President’s erratic policy of promoting trade in some areas while restricting it in others is hypocritical. Even worse, it sends mixed messages that increase uncertainty, hurt investment and job growth, and threaten American’s economic competitiveness.